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Pills, pricing and profitability

A debate on the alignment of industrial and health policies for better access to medicines European Development Days 2015, 3 June 2015

Local production of medicines

Millions of people do not have access to high-quality and affordable medicines. Local production of drugs seems to be a logical response to that need, yet in Sub-Sahara Africa, for example, less than 30% of essential drugs are produced locally. Producers face many challenges including quality, safety and price competitiveness but also inadequate policy coherence between health, trade and industrial policies. At a debate at the European Development Days 2015 it became clear that policy coherence is an issue which concerns both developing and donor countries.

Millions of people in developing countries are still lacking access to medicines at the right price, with the appropriate quality, in an adequate dosage form, and with appropriate medical support and supervision. The causes of this are manifold and range from a patent-incentivised R&D-system to regulatory challenges, as well as challenges in the health system such as health financing and supply chain management.

Nonetheless, access to medicines is often framed as an issue of price and distance. Price because the cost of medicines excludes millions of people from accessing them when they most need them or causes financial catastrophe for people living in poverty. And distance because it is people in the most remote areas that suffer most from poor supply chains and the lack of qualified dispensing staff.

Local production of pharmaceutical products in developing countries appears as the natural response to some of the access problems, such as stock-outs or rural supply chains and alignment to local epidemiological needs. But pharmaceutical companies in developing countries, especially LDCs, face many challenges in terms of quality, safety, and price competitiveness.

At this year’s European Development Days in Brussels, the head of GIZ’s Competence Centre for Health, Inge Baumgarten, facilitated a debate on ‘pills, pricing and profitability’ in which panellists (see box) debated approaches to making health, trade and industrial policies more coherent to achieve the double impact of access to medicines and pharmaceutical sector strengthening.


Panellists

  • Emmanuel Mujuru: CEO, Plus Five Pharmaceuticals (Zimbabwe) and Chair of the Southern African Generic Medicines Association (SAGMA), and Vice-Chairperson of the Federation of African Pharmaceuticals Manufacturers’ Associations (FAPMA)
  • Moredreck Chibi: Technical Officer on the local production of pharmaceuticals at WHO Headquarters
  • Jürgen Reinhardt: Senior Industrial Development Officer, Competitiveness, Business Environment and Upgrading Unit (BIT/CBU); Business, Investment and Technology Services Branch, United Nations Industrial Development Organization (UNIDO)
  • Christoph Spennemann: Legal Expert within the Intellectual Property Unit, Division on Investment and Enterprise, United Nations Conference on Trade and Development (UNCTAD)
  • Anja Kopyra: Desk Officer, Federal Ministry for Economic Cooperation and Development (BMZ)
  • Corinna Heineke: Head of Global Project ‘Access to high-quality and affordable medicines in Africa and South-East Asia’, GIZ

Local Production on the Global Agenda

Over the last few years local pharmaceutical production has become a mainstream solution towards better access to medicines. But local pharmaceutical companies lack the capacity to fill gaps in supplies. In Sub-Sahara Africa only 25-30% of the needed essential medicines are produced locally. And it is particularly the price competitiveness and quality of locally produced medicines that lets some health advocates doubt the role of local pharmaceutical production. This raises the question of how the pharmaceutical sector in developing countries can be built in a manner that is profitable for the industry and simultaneously contributes to qualitatively better and more affordable medicines. UNIDO’s Jürgen Reinhardt evaluates this dilemma as follows: ‘Once we succeed in establishing a proper business environment that allows business to flourish, we will see the entrepreneurial spirit make advances.’ Improved policy coherence – a holistic approach – was essential to strengthen the pharmaceutical industry. But it also required sufficient time spans; building a local pharmaceutical industry cannot be achieved in the short-term, according to Reinhardt.


Political and economic environments matter

Emmanuel Mujuru, Plus Five Pharmaceuticals, Zimbabwe

Indeed, local companies face many challenges in becoming more competitive with generic medicine producers mainly from Asia. Emmanuel Mujuru, CEO of Zimbabwean manufacturer Plus Five Pharmaceuticals, stressed the importance of the political and economic environment. For example, in Zimbabwe, tariffs on raw materials increased the costs of production significantly; and value-added tax on locally produced medicines – at 15% – is higher than on drugs that are imported duty free. Furthermore, the financial crisis and the introduction of the US-Dollar benefited the importers who could now dominate the market. The Zimbabwean situation echoes in many other African countries where a lack of policy coherence and coordination among different government departments weakens the possibilities of local production. In addition, African pharmaceutical markets are significantly being influenced by donors who distribute medicines free of charge.


Strengthening local production in developing countries as a long-term objective

Moredreck Chibi, WHO

As lead implementing agency of a European Commission-funded project, WHO seeks to promote access to medicines in developing countries through local production. The organisation has identified four areas for achieving the long-term goal of competitive local pharmaceutical production:

  • policy analysis for policy coherence across different government sectors to create a conducive environment for local production;
  • creating global resources and generating advocacy materials;
  • direct technical support to national government structures and pharmaceutical companies to bolster their local manufacturing capacity;
  • working on other medical technologies such as vaccines, medical devices, in-vitro diagnostics, in order to support local production capacity.

Changing policies and implementing them was a long-term initiative, as well as making the necessary investments in the industry, said Moredreck Chibi of WHO. As a result, agencies face some difficulty in having to marry long-term and sustainable results with time-bound funding. Another challenge is seen in the lack of expertise and human resources, which are therefore also a focus of WHO support.


Policy Coherence and its Obstacles

‘To make local production successful and contribute to access to medicines, countries need policies and laws that aim towards the same objective and do not contradict each other,’ said Christoph Spennemann. Among the policy areas that need aligning are: medicines registration and regulation; medicines procurement; technology development and transfer; research and development; investment promotion; intellectual property rights; and trade.

These efforts can be supported through regional integration where countries can learn from each other’s best practices and regionally harmonized policy and legal frameworks can trigger adaptation of national policies. The East African Community (EAC) has followed this model in various areas: The drug regulation framework has been harmonized; tariffs on pharmaceutical inputs have been phased out; and the implementation of the EAC Pharmaceutical Manufacturing Plan for Africa is promoting local pharmaceutical production.

Unfortunately, however, the EAC has not yet found an appropriate response to counterfeit and substandard drugs, and member states have responded in a way that contradicts the principle of policy coherence. Kenya introduced the Anti-Counterfeit Act and Uganda the Counterfeit Goods Bill. According to Spennemann, these laws mean that remedies which were normally restricted to those that intentionally use someone else's trademark or those that market sub-standard drugs may become applicable to generic producers, for example when making copies of a patented drug for marketing approval purposes. These remedies and their wrong interpretation can even lead to imprisonment of generic producers. This was a major drawback for generics production in the EAC despite the regional bloc committing to harness the flexibilities of the Trade-related Intellectual Property Rights Agreement or TRIPS (namely through its Regional Intellectual Property Policy on the Utilisation of Public Health-Related WTO-TRIPS Flexibilities and the Approximation of National Intellectual Property Legislation). Policy makers were not aware of the impact of inappropriate intellectual property enforcement legislation on TRIPS flexibilities and other tools to promote access to medicines. UNCTAD thus sees its role in advising developing countries on appropriate legal frameworks to promote access to medicines through local pharmaceutical production.


What can a donor do to support policy coherence?

The Federal Ministry for Economic Cooperation and Development (BMZ) considers development as a cross-cutting objective which needs to be taken account of in all of Germany’s international cooperation agreements with developing countries. Since 2006 the Federal Ministry has invested considerably in supporting different pillars of local pharmaceutical industries: improving quality infrastructures and regulatory capacity; strengthening local manufacturers’ associations; supporting training and higher education institutions; supporting countries to implement the TRIPS-Agreement and to harness its provisions for better access to medicines; as well as facilitating company-to-company know-how transfer. But BMZ has also developed a policy instrument which offers, for the first time, strategic options to enhance and promote interministerial cooperation and policy coherence for development. The so called Cross-Sector Cooperation Fund (abbreviated ‘Polifund’ from its German name) is designed to network the German Government’s variety of approaches more effectively in order to enhance the coherence of Germany’s overall international commitment. Its objective is to increase the effectiveness of the different federal ministries’ individual ODA measures, to guarantee a unified approach by the German government in partner countries, and to make use of any synergies. The Polifund forms part of the BMZ budget title ‘International Cooperation with Regions for Sustainable Development’ (IZR), which was initiated in late 2011 in order to tackle global challenges through innovative, cross-sectoral and cross-regional approaches.


Policy Coherence in practice

Corinna Heineke, GIZ

Building on BMZ’s portfolio, GIZ was commissioned in late 2014 to develop a project on access to high quality and affordable medicines in Africa and South East Asia’ within the Cross-Sector Cooperation Fund. The new format of the Fund allowed GIZ to place policy coherence and coordination challenges at the centre of its work, said Corinna Heineke, the project’s head. First, policy coherence features as one of three fields of activities, directly addressing policy-makers in the partner countries in order to facilitate interministerial coordination and identify the respective national and regional challenges in aligning policies. ‘The Cross-sector Cooperation Fund also gives us the opportunity to bring on board the German regulatory authorities in the portfolio of the Federal Ministry of Health. It can thus harness the expertise of the Paul-Ehrlich-Institut on the regulation of blood products and that of the Federal Institute for Drugs and Medical Devices (BfArM) on drug registration and other quality issues,’ explained Heineke. Furthermore, with the project scope encompassing two regions, an exchange of expertise and experience between the two regions could be facilitated.

During the appraisal mission for the project to Thailand the research team had a meeting with government representatives. All relevant actors regarding availability of medicines came together in one room: the Ministry of Health, the Food and Drug Authority, the Government Pharmaceutical Organisation, the Health Intervention and Technology Assessment Programme. This cooperation allows Thailand to identify ways of making medicines available through their universal health coverage scheme at a cost that is affordable for the national health system, be it through local production of medicines or negotiating prices with foreign suppliers. Bilateral aid has often triggered silo-thinking instead. Development cooperation often worked along sectorial boundaries so that a programme would partner with either the health authorities or the industrial development units in a government. According to Corinna Heineke, it was encouraging the new policy instrument can begin to blur some of the boundaries. 


June 2015


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